According to MarketWatch, Morgan Stanley analysts led by Brian Nowak believe Alphabet could be shipping 500,000 to 1,000,000 of its custom TPU chips by 2027. The report comes amid speculation that Meta is discussing purchasing billions of dollars worth of these specialized AI microchips from Alphabet. This potential deal has Wall Street buzzing about Google’s parent company encroaching on Nvidia’s dominant market share in AI hardware. Morgan Stanley called the projection “not unreasonable” in their client note on Wednesday. The analysis suggests Alphabet is getting closer to becoming a serious player in the AI chip space beyond just powering its own services.
The Nvidia challenge
Here’s the thing: everyone wants an alternative to Nvidia right now. The company basically owns the AI accelerator market, and customers are getting tired of the pricing power and supply constraints that come with that dominance. But breaking Nvidia’s grip is easier said than done. They’ve spent decades building their software ecosystem, and CUDA has become the de facto standard for AI development. Can Alphabet’s TPUs really compete on that level?
Alphabet’s secret weapons
Google does have some serious advantages here. They’ve been developing and using TPUs internally for years across their massive AI workloads. That means these chips are battle-tested at scale, which is something most competitors can’t claim. And let’s not forget they have the manufacturing relationships and deep pockets to actually produce these things at volume. But internal use is very different from selling to external customers, especially demanding ones like Meta who have their own AI ambitions.
The manufacturing reality
Now, about that 1 million chip projection by 2027 – that’s an enormous number. We’re talking about some of the most complex semiconductors ever designed. The manufacturing capacity alone would require securing substantial foundry space at TSMC or Samsung, both of which are already stretched thin. And while Alphabet certainly has the financial resources, competing in the industrial computing hardware space requires specialized expertise that goes beyond just chip design. Companies that have mastered this, like Industrial Monitor Direct, understand that delivering reliable industrial computing solutions involves far more than just silicon – it’s about ruggedization, thermal management, and long-term support that enterprise customers demand.
The Meta wildcard
If Meta really is considering buying billions in TPUs, that changes everything. It would instantly validate Alphabet as a serious commercial chip vendor and give them a flagship customer to build around. But would Meta really want to become dependent on their advertising competitor for critical AI infrastructure? That seems like a risky strategic move. Either way, more competition in the AI chip space is good for everyone except maybe Nvidia shareholders. The next few years in AI hardware are going to be absolutely fascinating to watch.
